The budget submitted for discussion is significantly affected by the current crises. The consequences of the energy crisis, the Russian war of aggression against Ukraine, coronavirus and general inflation are significant cost drivers that are placing an undue burden on the budget. Despite all efforts to make savings, the explosive cost increases cannot be absorbed. For example, it is imperative to continue pending and already started construction projects in the school and daycare sector from the structural aid program for the city of Salzgitter. The implementation of these investment measures is probably more important than ever for maintaining a functioning infrastructure and a liveable urban climate in Salzgitter, especially in view of the crises.

In planning the budget, Mayor Klingebiel and his management team have made considerable efforts to make savings. As a result, however, the City of Salzgitter must remain capable of acting. This means that staff are urgently needed to cope with constantly growing tasks. In addition, a municipality is obliged to cover the necessary costs for the provision of services of general interest for the population living in Salzgitter and to fulfill its statutory duties. In addition, in recent years, the federal and state governments have imposed ever-increasing tasks on the municipalities, in some cases without the municipalities being fully reimbursed. Against the background of this complex situation, which has only been outlined above, it was a particular challenge to draw up this budget.

In detail:

Preparation of a double budget
The administration is presenting a joint budget for the 2023 and 2024 financial years, as the two-year planning has proven its worth. In accordance with Section 112 (3) sentence 2 of the NKomVG, the budget statutes contain separate budgets for two financial years.

Provisional annual financial statements 2021
The provisional annual financial statements for 2021 close with a significant shortfall of € 21,522 thousand. While the state of Lower Saxony had fully compensated for the trade tax losses in 2020 due to the epidemic situation caused by COVID-19, resulting in an annual surplus of € 2,755 thousand, the crisis will have its full financial impact in 2021 and beyond. Nevertheless, the structural shortfall originally planned in the 2021 budget can essentially be covered by the company's own consolidation measures in administrative implementation and a state requirement allocation of € 8,000 thousand. of € 8,000 thousand from the planned € 41,183 thousand by € 19,661 thousand.

Supplements 2022
Due to the extensive planning support for the 2022 financial year through a total of three approved addenda, no additional forecast was prepared. The second addendum in particular takes into account the cautiously forecast improvements of € 8,482 thousand compared to the originally planned deficit of € 48,146 thousand in the earnings budget with a new deficit of € 39,664 thousand. This is due, on the one hand, to the continued impact of the crisis caused by the COVID-19 epidemic, which will be exacerbated by the effects of the war of aggression against Ukraine launched by Russia in 2022. In addition to the general adverse effects on the economy due to disrupted global supply chains, there are now also challenges such as the admission of refugees and multiplied energy costs. Against this backdrop, it is unlikely that the budget shortfall will be significantly lower in 2022 than in the provisional annual financial statements for 2021.

The crisis is also clearly noticeable in the area of investments, with the result that the medium-term financial planning of the third addendum in particular includes significant increases in the credit authorization to cover the cost increases in the business plan of the building management, purchasing and logistics company (SZ G.E.L.).

Budget planning 2023/2024
The organizational units of the core administration and the in-house operations have planned their budgets and business plans in the 2023/2024 dual budget in accordance with the repeat budget requirement, i.e. only those changes compared to the medium-term financial planning of the 2021/2022 dual budget that are absolutely necessary have been announced.

Profit and loss budget

The 2023 contribution budget closes with a deficit of € 42,889 thousand in the earnings budget of the core administration. This represents a furtherdeterioration of € 10,728 thousand compared to the value of the medium-term planning of the 2021/2022 budget, which still assumed a budget deficit of € 32,161 thousand for the 2023 planning year.The budget shortfall for 2024 changes even more drastically from € 15,892 thousand to € 70,250 thousand, which corresponds to a deterioration of € 54,358 thousand. Even if the orientation data from May 2022 still forecasts a positive development of general cover funds in both the planning years and the medium-term financial planning and the city assumes a positive development on this basis, particularly in terms of trade tax,this additional income cannot offset the immense and diverse cost increases and additional expenses caused by the crisis:

• The additional expenses from loss compensation alone, which have to be paid to municipal companies such as Bäder, Sport und Freizeit Salzgitter (BSF) and Kraftverkehrsgesellschaft mbH Braunschweig (KVG), amount to €7,779 thousand in 2023 and a further €10,865 thousand in 2024, with an upward trend in the medium-term planning period.
• The discontinuation of the state subsidy in accordance with the Lower Saxony Act on the Implementation of the Second Book of the Social Code and Section 6b of the Federal Child Benefit Act (Nds. AG SGB II) will result in a large shortfall in the budget of the Social Services and Senior Citizens department. Together with increases in costs and case numbers for social benefits, this will result in a deterioration of € 5,690,000 in 2023, even € 9,212,000 and slightly increasing amounts in subsequent years.
• In the children, youth and family department, there is a deterioration of € 8,006 thousand in 2023, € 8,965 thousand in 2024 and slightly increasing amounts in the medium-term financial planning across the entire range of services from daycare centers to maintenance advances.
• The energy costs for the lighting systems of the Civil Engineering and Transport department will increase by 50%. Together with falling wastewater income from WEVG and rising operator fees to ASG, the budget of the specialist service will deteriorate by € 1,556 thousand in 2023, approximately double in 2024, namely € 3,206 thousand, and increase slightly in subsequent years.

In addition to these serious items, there are many other changes from the applications of the organizational units, all of which together mean a further €3,608 thousand deterioration in 2023, and slightly more for 2024 at €3,669 thousand.

Added to this are the changes affecting the entire core administration from central planning. Personnel costs will increase by € 16,364 thousand in 2023 and by € 18,571 thousand in 2024 et seq. Rent and ancillary costs will first increase by € 9,545 thousand in 2023, then by € 16,073 thousand in 2024 and reach € 28,577 thousand in 2027. Finally, investment activity also has an impact on depreciation, which will increase by € 1,208 thousand in 2023, by € 502 thousand in 2024 and by € 2,116 thousand each year in the medium-term financial planning.

Against this backdrop, it is not possible to present a balanced budget within the meaning of Section 110 (4) NKomVG. Consequently, a budget protection concept (HSK) must be drawn up in accordance with Section 110 (8) NKomVG. It should be noted that due to the extension of the special regulation for epidemic situations and the consequences of the war in Ukraine, it is possible to dispense with the preparation of an HSK by resolution in the event of resulting deficits in accordance with Section 182 (4) No. 3 NKomVG in conjunction with Section 182 (5) NKomVG.

After extensive offsetting of the costs for the implementation of infection protection measures in the context of COVID-19, the slump in trade tax as a result of the pandemic and the industrial transformation processes initiated (€ 20,943 thousand in 2023) as well as the cost increases caused by the war in Ukraine (€ 21,988 thousand in 2023), such as for materials, social costs, fuel and energy, there is only a shortfall of € 6,793 thousand in the planning year 2023. However, it will not be possible to balance the budget in any year of the overall planning period, although it will fall to just € 553 thousand in 2027. The total shortfall for the 2023/2027 planning period is € 78,820 thousand.

It is therefore not possible to dispense with the preparation of an HSK. However, as all consolidation potential has already been exhausted in the draft budget and even all expenditure estimates in 2023 have been reduced by three percent across the board, there is no scope for further individual measures in line with the latest HSK decree. Instead, the framework set by the decree for flat-rate freezes of two percent will be exhausted in the form of a budget freeze. In 2023, this block amounts to €6,836 thousand, in the following year €7,348 thousand and €36,466 thousand over the entire planning period until 2027.

After deducting the above-mentioned crisis costs from the epidemic situation and the war in Ukraine and taking into account the budget freeze, there will ultimately be a surplus of € 42 thousand in 2023, but still a budget shortfall of € 22,403 thousand in 2024. In the medium-term financial plan, the planned surplus of € 6,874 thousand in 2027 is not sufficient to offset the planned shortfall of € 23,149 thousand in 2025 and € 3,718 thousand in 2026. Over the entire planning period until 2027, this results in a total shortfall of € 42,354 thousand. Compared to the total deficit of € 45,304 thousand in the absolute recurring budget, however, this is an improvement of € 2,950 thousand.

Excluding refugee costs - for both short-term accommodation and long-term integration (€ 17,093 thousand in 2023 and around € 19,00 thousand in 2024 onwards) - a surplus can be shown in all years of the overall planning period and the budget can be balanced. In 2023, there is a planned surplus of € 17,135 thousand, in 2024 a planned deficit of only € 3,112 thousand. In the overall planning period up to 2027, there will be a surplus of €52,587 thousand.

These statements make it urgently clear that the dramatic development of the municipal budget and financial situation is not "home-made" but "externally caused".

The City of Salzgitter adheres to this presentation, which has been established in recent years, in order to make it clear that the various crisis situations - without any significant recovery periods - mean long-term burdens for the municipal budget. The demand for direct, complete and permanent financial relief from the state and federal government for tasks transferred as part of crisis management remains. It is not enough to show crisis-related deficits separately in the municipal balance sheet. Only the consistent implementation of the principle of connectivity by offsetting the imposed cost burdens can free municipalities such as Salzgitter from almost hopeless consolidation obligations and free up capacities for municipal self-administration in the interests of their citizens.

Investments

While the budget protection targets are met in the operating budget, the restriction of investment measures to the bare minimum, as in the original 2021/2022 double budget, cannot be continued. As the third supplementary budget for 2022 already shows, extensive investments with significant cost increases will have to be made. This trend will also continue in the 2023/2024 supplementary budget. After budgeting for all investment measures that cannot be postponed, there is a borrowing requirement of € 17,459 thousand for 2023 and as much as € 44,650 thousand for 2024. The financing requirement also remains high in the medium-term financial planning and falls from € 36,311 thousand in 2025 and € 16,497 thousand in 2026 to € 12,220 thousand in 2027. In the overall planning period up to 2027, the financing requirement thus increases by € 66,280 thousand from € 42,097 thousand to € 127,136 thousand.

Of this, € 23,847 thousand is attributable to the core administration. The following measures with costs of over € 1,000 thousand in the overall planning period are particularly significant:

• The acquisition of land (purchase of commercial space) is priced in by the investment management in the special budget for economic development in the years 2023 and 2024 with € 500 thousand each.
• The rescheduling of estimates for vehicles, equipment and furnishings in the fire department, which was already partially taken into account in the 2nd addendum 2022 with commitment appropriations, amounts to around € 1,800 thousand in both 2023 and 2024. The specialist service also reports considerable amounts totaling € 3,500 thousand in the medium-term financial planning.
• In the education specialist service, new estimates for equipment in schools and digitalization in all types of schools amount to € 906 thousand in 2023 and € 1,620 thousand in 2024. Including medium-term financial planning, a total of € 6,003 thousand is budgeted here.
• An annual investment promotion program of € 225 thousand for the establishment of medical practices of the health department costs € 1,125 thousand over the entire planning period until 2027 (of € 1,165 thousand in the overall budget of the health department).
• The Civil Engineering and Transport department is postponing measures with a volume of €2,618k from 2023 to subsequent years. This will have a particularly negative impact on 2024. The new planning amounts to € 5,249 thousand for the year and a further € 2,510 thousand for 2025.

SZ G.E.L. accounts for € 62,658 thousand of the additional total financing requirement. The changes to the asset plan with an impact on credit authorization can be found in the business plan and its lists of measures.

Even if repayments are adjusted to the increasing financing requirements, net debt repayment cannot be determined in any year of the overall planning period until 2027. The total credit authorization to be applied for amounts to € 127,136 thousand. After deducting the total repayment of € 62,300 thousand, the total net new debt therefore amounts to € 64,836 thousand.

The SRB's special loan authorization for the closure of the Fuhsetal landfill site is reduced from € 10,853 thousand to € 8,180 thousand and shifts € 3,597 thousand from 2023 and 2024 to 2026 and € 4,582 thousand to 2027. Including this special authorization results in a total loan authorization of € 135,316 thousand.

Even if the core administration does not require any borrowing authorization in 2026 and 2027 and the investment-related incoming payments even exceed the outgoing payments for investment activities, this surplus of incoming payments cannot be used to cover the financing requirements of the owner-operated companies. This is because the surplus is largely the result of increased repayments to the core administration - in relation to the sharp rise in loans (forwarded credit authorizations) of the proprietary companies. Against this background, the surplus is also not included in the calculation of total net new debt.

Even if the investment volume increases immensely, a cancellation of measures would threaten the implementation of legal obligations and the provision of services of general interest as well as social peace in Salzgitter. In view of this area of tension, the HSK cannot provide any debt relief for investments. Extending the HSK period by a further two years beyond the medium-term financial plan would also not lead to any expected success in this respect and should therefore be avoided. The situation in the financial years 2028 and 2029 does not appear to be predictable against the backdrop of the changing times of crisis.